CHFA Down Payment Grant vs. Second Mortgage: Key Differences

If you are asking what is the difference between a CHFA down payment grant and a CHFA second mortgage, the short answer is that one is money you keep and the other is money you eventually repay. This guide breaks down how each Colorado Housing and Finance Authority (CHFA) assistance option is structured, when the second mortgage comes due, and how Colorado Springs buyers — including military families facing PCS moves — think through the choice.

What is the difference between a CHFA down payment grant and a CHFA second mortgage?

Both options come from the Colorado Housing and Finance Authority and both help with down payment and/or closing costs when you finance the home with a CHFA first mortgage program.

The down payment assistance grant requires no repayment. Once it is applied at closing, you do not owe it back.

The second mortgage is a real loan recorded against the home. Repayment of the balance is deferred until certain events — such as payoff of the first mortgage, the sale or refinance of the home, or the home no longer being your primary residence.

Here is the side-by-side view before we go deeper into each option.

Feature	CHFA down payment grant	CHFA second mortgage
Repayment	None required	Deferred; balance due at payoff, sale, refinance, or when the home stops being your primary residence
Monthly payment	No	No — repayment is deferred, not monthly
Amount available	Capped at a set ceiling or a share of the first mortgage, whichever is less	Capped the same way, but at a somewhat larger share of the first mortgage
Special-population programs	Not specified	First-generation homebuyers and individuals living with a permanent disability can access programs offering the maximum regardless of first mortgage size
Effect on first mortgage pricing	Higher interest rates apply	Higher interest rates apply

With the structure clear, let’s look at each option on its own terms.

How the CHFA down payment assistance grant works

The CHFA down payment assistance grant is exactly what the name suggests: assistance applied toward your down payment and/or closing costs that carries no repayment obligation.

The grant amount is limited to the lesser of a set dollar ceiling or a percentage of the first mortgage, so the size of the loan you take out determines how much grant money is actually available to you. Your CHFA Participating Lender confirms the current limits when you apply.

What the grant does at closing

The grant funds arrive at closing and reduce what you need to bring out of pocket. CHFA still requires a minimum borrower financial contribution toward the purchase, so the grant supplements your money rather than replacing all of it.

Even if you contribute your own funds toward the down payment, CHFA allows you to use the grant on top of that contribution.

The trade-off CHFA discloses

CHFA notes that higher interest rates apply when you use its assistance options. In other words, the grant is not free of trade-offs — the pricing on the first mortgage reflects it. That is part of the math a CHFA Participating Lender walks through with you.

Now compare that structure to the second mortgage, which works very differently on the back end.

How the CHFA second mortgage works

The CHFA second mortgage is a loan for down payment and/or closing cost assistance that sits behind your CHFA first mortgage as a lien on the property.

Like the grant, the second mortgage is capped at the lesser of a set ceiling or a share of the first mortgage — but that share is larger than the grant’s, which is why the second mortgage can deliver more assistance on the same purchase.

When repayment happens

You do not make monthly payments on the CHFA second mortgage. Repayment of the balance is deferred until a triggering event occurs:

• You pay off the first mortgage
• You sell the home
• You refinance the home
• The home is no longer your primary residence

Any one of those events makes the deferred balance due. Until then, it simply sits behind the first mortgage.

Programs for first-generation buyers and buyers with disabilities

CHFA offers specific second mortgage programs for first-generation homebuyers and for individuals living with a permanent disability. These programs make the maximum assistance amount available regardless of the size of the first mortgage.

If either category describes you, ask your lender about these programs specifically — the standard percentage-of-loan cap does not constrain them the same way.

The repayment triggers above matter enormously for one group of Colorado Springs buyers in particular: military families.

Why the repayment triggers matter for military buyers in Colorado Springs

Colorado Springs is a PCS town. Buyers connected to Fort Carson, Peterson Space Force Base, Schriever, and the Air Force Academy often know a move is possible within a few years of closing.

That timeline interacts directly with the second mortgage’s repayment triggers. Selling the home on a PCS move makes the deferred balance due. So does converting the home to a rental, because the property would no longer be your primary residence.

The grant has no such triggers. Whether you stay ten years or move in two, there is nothing to repay.

Refinancing later

Refinancing the first mortgage is also a repayment trigger for the second mortgage. If you expect to refinance down the road, the deferred balance becomes part of that transaction’s math.

None of this makes one option right or wrong — it means your realistic timeline in the home should drive the conversation with your loan officer. Next, the eligibility rules, which are the same regardless of which option you pick.

Eligibility rules that apply to both options

You do not qualify for the grant or the second mortgage on their own. Both are available to homebuyers using one of CHFA’s first mortgage loan programs, and CHFA’s general purchase requirements apply.

CHFA’s general requirements

• Borrowers must meet CHFA’s mid-credit score threshold, which your lender verifies from your credit report
• Household income must not exceed CHFA’s income limits
• Each borrower must complete a CHFA-approved homebuyer education class before closing
• Borrowers must make a minimum financial contribution of their own toward the purchase

On top of CHFA’s rules, you must qualify under the underwriting guidelines of the CHFA Participating Lender — things like your debt-to-income ratio and credit history. CHFA does not qualify homebuyers directly and does not lend directly to consumers; approved lenders qualify customers and make the loans.

One of those requirements — homebuyer education — trips up more closings than any other, so it deserves its own section.

The homebuyer education requirement, explained

Every CHFA borrower must individually and independently register for and complete a CHFA-approved homebuyer education class before the mortgage loan closing date. Each borrower on the loan needs their own certificate of completion.

In-person and online options

In-person classes are free, live courses offered through providers across Colorado, in English and Spanish. Online classes are self-paced, carry a fee, and require a follow-up call with the education provider before the certificate is issued.

In both cases the certificate comes from the education provider, not CHFA, and goes to your lender for the loan file.

Take the class early

Certificates are valid for a limited period, and you must be under contract to purchase before the certificate expires. CHFA recommends taking the class early in your housing search; waiting — or delaying the online follow-up call — can delay or postpone your closing.

The class covers budgeting as a homeowner, how credit affects your options, finding a real estate agent and lender, the costs of homebuying, and what to expect after closing. With education handled, the real decision is which assistance structure fits your situation.

How to decide between the grant and the second mortgage

There is no universally correct answer — the decision is a trade between the amount of help available now and the obligation attached to it later.

Questions to work through with your lender

• How much assistance do I actually need to close, after my own contribution?
• How long do I realistically expect to keep this home as my primary residence?
• Am I likely to sell or refinance within a few years — for example, on a PCS move?
• Do I qualify for the first-generation or disability-focused second mortgage programs?
• How does each option affect the pricing on the first mortgage in my scenario?

Because higher interest rates apply with either assistance option, ask your lender to show the full picture — the first mortgage payment including property taxes and homeowners insurance, the assistance amount, and any deferred balance — side by side.

Once you have the comparison in hand, the path forward is straightforward.

Your next step

CHFA loan programs are only available through its statewide network of Participating Lenders, so the concrete next step is a conversation with one. A Participating Lender reviews your credit report, income, and purchase plans, confirms the current assistance limits, and shows you the grant and the second mortgage priced against each other.

719 Lending works with Colorado buyers on CHFA down payment assistance scenarios every week, including military families balancing BAH, purchase timing, and future PCS orders. Register for a homebuyer education class early, then sit down with a loan officer and run both options against your actual numbers.

Frequently asked questions

Do you have to pay back a CHFA down payment grant?

No. The CHFA down payment assistance grant requires no repayment. Once the grant is applied toward your down payment and/or closing costs at closing, you do not owe it back, regardless of when you later sell or refinance.

When does a CHFA second mortgage have to be repaid?

Repayment of the CHFA second mortgage is deferred until a triggering event: payoff of the first mortgage, the sale or refinance of the home, or the home no longer being your primary residence. There are no monthly payments before that.

Which is bigger, the CHFA grant or the CHFA second mortgage?

Both are capped at the lesser of a set ceiling or a share of the first mortgage, but the second mortgage’s share is larger, so it can provide more assistance on the same loan. First-generation homebuyers and individuals living with a permanent disability can access second mortgage programs offering the maximum regardless of first mortgage size.

Can I use CHFA assistance if I have my own down payment money?

Yes. CHFA states that even if you contribute toward the down payment yourself, you may still use the grant or the second mortgage. Note that CHFA also requires a minimum borrower financial contribution toward the purchase in all cases.

Does using CHFA down payment assistance change the interest rate?

CHFA discloses that higher interest rates apply when you use its assistance options. A CHFA Participating Lender can price the first mortgage with and without assistance so you can compare the trade-off in your specific scenario.

Do I have to take a class to get CHFA down payment assistance?

Yes. Every CHFA borrower must individually complete a CHFA-approved homebuyer education class before closing. In-person classes are free; online classes carry a fee and require a follow-up call before the provider issues your certificate, which goes in your loan file.

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719 Lending Inc. is not affiliated with or endorsed by HUD, FHA, VA, USDA, CHFA, the CFPB, or any government agency.

Last updated: September 2026